Governmental Accounting Standards Board (GASB)

Under GASB, CalPERS employer groups are categorized into three types of plans:

• A single-employer plan is a defined benefit pension plan used to provide pensions to employees of only one employer.
• An agent multiple-employer plan has assets pooled for investment purposes, but separate accounts are maintained for each individual employer so each employer's share of the pooled assets is legally available to pay the benefits of only its employees.
• A cost-sharing multiple-employer plan has pension obligations to the employees of more than one employer that are pooled, and the pension plan assets can be used to the pay the benefits of the employees of any employer that provides pensions through the pension plan. Generally, public agency plans with less than 100 active members are pooled plans, which are considered cost-sharing multiple-employer plans.

If you're a public agency, there are two ways to determine whether you're an agent or cost-sharing multiple-employer plan. The cover page of your GASB 68 Accounting Valuation Report will identify the type of plan. Alternatively, if your Annual Actuarial Valuation Report for funding purposes has sections 1 and 2 reported, then the plan is a cost-sharing plan; otherwise it's an agent plan.

Employers are required to report on their financial balance sheet their net pension liability, i.e., the unfunded liability for the pension benefits promised to current employees, retirees, and their beneficiaries.

The following figures will be required to be determined, related to defined-benefit pension plans as of a date (measurement date), no earlier than the end of the employer's prior fiscal year:

• Net pension liability (asset)
• Pension deferred outflows and deferred inflows of resources related to pensions
• Pension expense (income)

Employers participating in single-employer or agent multiple-employer plans will recognize 100 percent of the above amounts for each plan. Employers participating in cost-sharing plans will recognize their share of the risk pools collective amounts.

Net pension liability represents total pension liability less the fiduciary net position of the pension plan. Changes in net pension liability will be immediately recognized as pension expense or reported as deferred outflows/inflows of resources depending on the nature of the change.

There are also substantial changes to methods and assumptions used to determine actuarial information for GASB reporting:

• Disclosures and required supplementary information related to pensions are expanded.
• Entry Age Normal is the only allowable actuarial cost method.
• Projected benefit payments should include effects of ad hoc Cost-of-Living Adjustments (COLAs) considered substantively automatic.
• A single blended rate should be used to discount projected future benefit payments, based on two factors.
  1. The long-term expected rate of return on plan investments (net of investment expenses) that are expected to finance pension benefits to the extent that the plan’s fiduciary net position is projected to be sufficient to make projected benefit payments and is expected to be invested, using a strategy to achieve that return
  2. A yield or index rate for 20-year, tax-exempt general obligation (municipal) bonds with an average rating of AA or higher, to the extent that the conditions above are not met

• Public Agency - Agent
• Public Agency - Cost-Sharing
• Schools

CalPERS will provide the following support:

• Engage an external auditor to:
  • Issue an examination report over selected management's assertions related to census data maintained by CalPERS and opine on the schedule of changes in fiduciary net position by rate plan as a whole and on each rate plan column in the schedule for the agent multiple employer plans
  • Opine on the schedule of employer allocations and related notes and the schedule of collective pension amounts for school cost-sharing multiple-employer plans
  • Opine on the total net pension liability, total deferred outflows of resources, total deferred inflows of resources, and total pension expense related to public agency cost-sharing multiple-employer plans
• Provide employers with the note disclosures required by the new reporting standards, upon request
• Provide net pension liability and other pension-related amounts to assist employers with GASB 68 based on the type of plan (e.g., agent or cost-sharing) in which the employer is participating, if requested

Check this page frequently for updates regarding the GASB 68 implementation and email us if you have specific questions. You may also subscribe to the Employer Bulletin to receive updates regarding the new reporting requirements.